Justia Tax Law Opinion Summaries

The Culps each received $8,826.30 to settle a lawsuit and reported their payments as “Other income,” “PRIZES, AWARDS” in their 2015 tax return. In 2017 the IRS proposed to increase their taxes owed for 2015 to reflect a perceived underpayment, giving the Culps 30 days to respond and stating it would send a notice of deficiency if they failed to do so. The Culps did not respond. The IRS mailed a notice of deficiency, informing the Culps of their right to file a petition in the Tax Court within 90 days. In May 2018, the IRS sent the Culps another letter stating they owed only $2,087 in 2015 taxes, penalties, and interest—less than the amount previously assessed. Again they failed to respond. The IRS levied on their property, collecting approximately $1,800 from the Culps’ Social Security payments and 2018 tax refund.The Culps filed a petition in the Tax Court, which dismissed their petition for lack of jurisdiction, reasoning its “jurisdiction depends upon the issuance of a valid notice of deficiency and the timely filing of a petition,” 26 U.S.C. 6212, 6213, 6214. It found the petition untimely because the Culps did not file it within 90 days of the date the IRS sent the second notice of deficiency. The Third Circuit reversed. Congress did not clearly state that section 6213(a)’s deadline is jurisdictional; non-jurisdictional time limits are presumptively subject to equitable tolling. That presumption was not rebutted. View "Culp v. Commissioner of Internal Revenue" on Justia Law

The Supreme Court quashed the order of the district court granting the motion to dismiss filed by the State of Rhode Island, acting by and through the Division of Taxation (Division), in this appeal stemming from a series of transactions for the purchase and sale of gasoline, holding that the district court erred in granting the Division's motion to dismiss based on Plaintiff's failure to exhaust its administrative remedies.The tax at issue was levied on a transaction between Plaintiff and another party and was the subject of several transactions between various entities. Plaintiff reimbursed a third-party for the tax assessed on the sale of 300,000 barrels of gasoline and then initiated this action alleging constitutional violations and violations of the Motor Fuel Tax. The trial judge dismissed the case for Plaintiff's failure to exhaust administrative remedies. The Supreme Court reversed, holding that the trial judge erroneously dismissed the action based on Plaintiff's failure to exhaust its administrative remedies. View "Gunvor USA, LLC v. State, ex rel. Division of Taxation" on Justia Law

The Supreme Court quashed the order of the district court dismissing two actions challenging the State Division of Taxation's denial of Plaintiff's claim for a refund of $4,280,039 paid for Motor Fuel Tax assessed on the purchase and sale of 300,000 barrels of gasoline, holding that the the district court erred.Plaintiff purchased 300,000 barrels of gasoline from Defendant. The Division imposed a motor fuel taxes on the gasoline that was charged to Defendant, as the seller of the gas. Defendant sought reimbursement from Plaintiff, which sought a refund from the Division under R.I. Gen. Stat. 31-36-13. The Division denied Plaintiff's claim for a refund on the grounds that Plaintiff did not have a right to pursue a refund. Plaintiff then filed a complaint alleging constitutional violations and violations of the Motor Fuel Tax, among other claims. Plaintiff then appealed the Division's denial of its request for a refund. The hearing officer concluded that Plaintiff's claim was barred by both res judicata and administrative finality. Ultimately, both cases were dismissed. The Supreme Court quashed the decisions below, holding (1) Plaintiff had standing; (2) the trial judge erred in concluding that res judicata barred Plaintiff's appeal; and (3) the doctrine of administrative finality did not apply to bar Plaintiff's claims. View "Apex Oil Co. v. State, ex rel. Division of Taxation" on Justia Law

Under the Tax Equity and Fiscal Responsibility Act, TEFRA, 26 U.S.C. 6221–6234, a partnership’s tax liabilities were assessed on individual partners in proportion to their ownership interest. Partners reported their share of that income on their individual tax returns; the partnership supplied information on Schedule K-1. Determinations made at the partnership level were binding on all partners. Partners could opt out of partnership-level proceedings and could challenge partnership-level determinations during ongoing proceedings. Partners were entitled to receive a “notice of beginning of administrative proceedings,” NBAP, and a notice of a “final partnership administrative adjustment,” FPAA, by mail.Goldberg was a partner in two firms. The IRS began auditing the partnerships in 2001-2002 and believes it timely sent the required NBAPs and FPAAs to Ronald by certified mail. Goldberg later denied receiving the NBAPs. In 2010, while the Tax Court’s review of the FPAAs was underway, Goldberg challenged his tax liability for both partnership items, arguing that three-year statute of limitations for the assessments had expired. The IRS suggested raising the challenges in the Tax Court proceedings before the adjustments became final. Goldberg took no action. In 2013 the Tax Court entered judgment. The resulting liability determinations became final. The IRS notified Goldberg of the adjustments and initiated proceedings to collect $500,000. The Seventh Circuit affirmed. Goldberg received notice and had an opportunity to contest the partnership tax liabilities independent of any alleged failing on the IRS’s part. View "Goldberg v. Commissioner of Internal Revenue" on Justia Law

In 2018, Anaheim voters approved a Living Wage Ordinance (LWO). The LWO applied to hospitality employers in the Anaheim or Disneyland Resort areas that benefited from a “City Subsidy.” In 2019, Kathleen Grace and other plaintiffs (“Employees”) filed a class action complaint against the Walt Disney Company, Walt Disney Parks and Resorts, U.S., Inc. (“Disney”) and Sodexo, Inc., and Sodexomagic, LLC (“Sodexo”) alleging a violation of the LWO (Sodexo operated restaurants in Disney’s theme parks). Disney moved for summary judgment and Sodexo joined. It was undisputed the Employees were not being paid the required minimum hourly wage under the LWO. However, Disney argued it was not covered under the LWO as a matter of law because it was not benefitting from a “City Subsidy.” The trial court granted the motion for summary judgment. The Court of Appeal disagreed: “A ‘City Subsidy’ is any agreement with the city pursuant to which a person other than the city has a right to receive a rebate of transient occupancy tax, sales tax, entertainment tax, property tax or other taxes, presently or in the future, matured or unmatured.” The Court determined that through a "reimbursement agreement," Disney had the right to a rebate on transient occupancy taxes (paid by hotel guests), sales taxes (paid by consumers), and property taxes (paid by Disney), in any years when the City’s tax revenues were sufficient to meet certain bond obligations. Consequently, the Court found Disney received a “City Subsidy” within the meaning of the LWO and was therefore obligated to pay its employees the designated minimum wages. View "Grace v. The Walt Disney Company" on Justia Law

In this appeal stemming from a challenge to Maryland's Digital Advertising Gross Revenues Tax Act the Court of Appeals vacated the orders of the circuit court granting a declaratory judgment that a digital advertising tax was unconstitutional and illegal under federal law the Court of Appeals held that the circuit court lacked jurisdiction over the action.At issue was Maryland's Digital Advertising Gross Revenues Tax Act, codified at Title 7.5 of the Tax-General Article, which imposed a tax on annual gross revenues of certain high revenue businesses derived from state digital advertising services. Plaintiffs, various subsidiaries of Comcast Corporation and Verizon Communications, Inc., filed this action seeking a declaratory judgment that the tax was unconstitutional and illegal. The circuit court granted judgment for Plaintiffs. The Court of Appeals vacated the orders below, holding (1) Plaintiffs failed to exhaust mandatory administrative and judicial review remedies provided in the Tax-General Article for the resolution of tax disputes; and (2) absent exhaustion of the available statutory administrative remedies, the circuit court lacked jurisdiction over the challenge. View "Comptroller v. Comcast" on Justia Law

This appeal turns on the meaning of the phrase “partner level determinations” in Section 6230(a)(2)(A)(i) of the now-repealed Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). When the IRS adjusts the tax items of a partnership, these partnership-level changes often require corresponding adjustments to “affected items” on the individual partners’ income tax returns. The IRS makes these resulting partner-level changes using one of two procedures. If adjusting a partner-taxpayer’s affected item “require[s] partner level determinations,” the IRS must send the taxpayer a notice of deficiency describing the adjustment to the taxpayer’s tax liability, and the taxpayer has the right to challenge the adjustments in court before paying. If, on the other hand, adjusting the affected item does not “require partner level determinations,” the IRS generally must make a direct assessment against the taxpayer, and the taxpayer may challenge the adjustment only in a post-payment refund action.   The Eleventh Circuit affirmed the Tax Court. The court explained that making the relevant adjustments requires an individualized assessment of each taxpayer’s unique circumstances, we hold that they “require partner level determinations,” mandating deficiency procedures. The court explained that none of the authorities on which taxpayers rely addressed the ultimate question in this case—whether adjusting losses claimed on sales of property from a sham partnership requires partner-level determinations. Instead, all the on-point caselaw bolsters our conclusion. The court explained that because it concluded that the IRS was required to make partner-level determinations to adjust the taxpayers’ reported losses and itemized deductions, the IRS properly employed deficiency procedures to make these adjustments. View "Estate of James P. Keeter, Deceased, et al. v. Commissioner of Internal Revenue" on Justia Law

Taxpayers did not file returns for 2007 and 2012. The Tax Court concluded that taxpayers owed no deficiencies or penalties for those years, because the partnership losses claimed for those years exceeded the IRS’s adjusted non-partnership deficiencies.   The Ninth Circuit reversed and remanded for recalculation of the deficiencies and penalties for those years. The panel held that the unsigned, unfiled tax returns on which the partnership losses were reported were legally invalid because they had not been filed and executed under penalty of perjury and, therefore, could not be used to offset non-partnership income in an individual deficiency proceeding. Accordingly, the panel reversed the Tax Court’s deficiency determinations for these years and remanded with instructions to determine taxpayers’ deficiencies without regard to any partnership losses claimed on the legally invalid tax returns. For 2009 through 2011, taxpayers reported no tax liability because of large net operating losses (NOLs) from partnerships subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The panel explained that when carried forward as deductions, net operating losses composed of partnership losses can offset a taxpayer’s non-partnership income or instead are part of the “net loss from partnership items” under Internal Revenue Code Section 6234(a)(3), as it was then in effect. The panel remanded for the Tax Court to assess the non-partnership items in the recomputed deficiencies for those years, accounting for the TEFRA-eligible partnership components of the net-operating-loss deductions only in the Section 6234(a)(3) calculations of “net loss from partnership items.” View "CIR V. RITCHIE STEVENS, ET AL" on Justia Law

Plaintiff injured himself on the job while working as a photojournalist for media corporation Turner Broadcasting Systems, Inc. In the following years, while he was unable to work, Turner paid him for his leave. Plaintiff claimed that because his injury was job-related, Turner paid him workers’ compensation, while Turner claims that it paid him according to a separate disability policy. This distinction has legal significance because income earned as workers’ compensation is non-taxable, while disability payments are taxed. Turner reported the compensation as part of Plaintiff’s taxable income on the W-2s it filed with the IRS. Plaintiff sued Turner under 26 U.S.C. Section 7434 for willfully filing fraudulent information returns on his behalf. The district court granted summary judgment for Turner.   The DC Circuit reversed. The court explained that under Section 7434, a plaintiff must show: (1) the defendant filed an information return on his or her behalf, (2) the return was false as to the amount paid, and (3) the defendant acted willfully and fraudulently. The parties agree that the W-2s qualify as information returns, and Plaintiff has raised a dispute of material fact as to the second and third elements. As to falsity, Plaintiff’s injury was job-related, and a reasonable jury could therefore conclude that the W-2s were inaccurate because they overstated his taxable income by including workers’ compensation. And as to scienter, several pieces of evidence including the language of Turner’s own policies as well as communications between the parties could lead a factfinder to conclude that Turner knew or should have known the actual nature of these payments. View "Martin Doherty v. Turner Broadcasting Systems, Inc." on Justia Law

The Supreme Court affirmed the judgment of the district court granting an uncontested petition of the trustees of the Marvin S. Robinson Charitable Trust to retroactively modify the trust's terms to maintain its tax-exempt status as a "supporting organization" under the federal tax code, holding that Kan. Stat. Ann. 58a-416 authorized the retroactive modification of the trust.Under In Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), which held that the Internal Revenue Service (IRS) and federal courts are not bound by decisions of lower state courts on issues of state law but that these entities will defer to decisions of a state's highest court, an order allowing the retroactive modification of a trust's terms to maintain its tax-exempt status is binding on federal tax authorities only if it emanates from the Supreme Court. The Supreme Court agreed to review the district court's order in accordance with Bosch and affirmed the district court's judgment granting the petition, holding modification of the trust was proper. View "In re Marvin S. Robinson Charitable Trust" on Justia Law